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U.S. Posts Stronger Job Growth in July

Job seekers at a career fair on Thursday in Arlington, Va. Employers added 117,000 jobs in July, more than analysts had forecast.Credit
Alex Wong/Getty Images

The United States economy continues on a wobbly course, but there was a momentary sigh of relief on Friday as the government reported that employers added 117,000 jobs last month, slightly more than expected.

While hardly robust enough to produce a substantial change in the employment picture, the jobs growth calmed investors who feared that the stock market plunge on Thursday might pick up speed if the number had signaled a worsening of the already weak economic outlook.

Hours after the market closed, however, the economy was dealt a new blow when Standard & Poor’s downgraded the United States credit rating to AA+, from AAA. The move reflected the agency’s growing concern over the high level of federal debt.

During the day stocks seesawed before ending the session mixed, with investors wavering between encouragement over the jobs number and disappointment that the world’s economies were not on firmer footing.

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Julaynne Trusel works on an assembly line at a General Motors plant in Hamtramck, Mich. Companies added jobs in July, but the governments posted a net loss.Credit
Paul Sancya/Associated Press

Europe, in particular, is struggling to control a debt crisis that began in its smaller countries and now threatens the much bigger economies of Italy and Spain. A flurry of phone calls among European leaders led to announcements in Italy and elsewhere that reforms would be speeded up, though worries remain widespread that markets could resume their sharp fall if concrete steps to give financial support to Italy and Spain are not taken next week.

Those who have been waiting for the United States economy to move into high gear took little comfort in Friday’s jobs report from the Labor Department, even though it was better than the previous months, whose job gains were revised slightly upward to 46,000 in June and 53,000 in May.

Companies added 154,000 jobs in July, but state and local governments continued to backslide, shedding 39,000 jobs. The federal government added 2,000 jobs. The unemployment rate slipped a notch to 9.1 percent, from 9.2 percent in June, but that was mainly because some people had simply given up looking for work.

The news tempered, but did not silence, talk of a double-dip recession. “It gives us some temporary relief,” said Nigel Gault, chief United States economist at IHS Global Insight. “I suspect, though, that relief will probably not last too long as people refocus on what they think will happen in the future.”

Economists are now worried about the reduction in government spending outlined in the Congressional deal this week to raise the country’s debt ceiling. Deep divisions remain between the two political parties on how to cut spending further at a time when many analysts worry that the economy can ill afford it.

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Christian Hernandez found full-time work this summer at a Target store in Miami.Credit
Joe Raedle/Getty Images

Speaking at the Washington Navy Yard as he announced new programs for returning veterans from the wars in Afghanistan and Iraq, President Obama called for Congress to extend the payroll tax credit and emergency unemployment insurance, measures that are scheduled to expire at the end of this year.

“There’s no contradiction between us taking some steps to put people to work right now and getting our long-term fiscal house in order,” Mr. Obama said. “In fact, the more we grow, the easier it will be to reduce our deficits.”

Other signs that the recovery has slowed to a crawl are mounting. The Commerce Department reported this week that consumer spending, which accounts for up to 70 percent of economic activity, actually declined in June for the first time in nearly two years.

A closely watched survey of manufacturers showed that employment in July grew at a slower rate than in June and that new orders of factory goods fell. Companies like Merck, Cisco and Boston Scientific have all announced layoffs in recent weeks. Housing prices are still extremely weak.

Jan Kokes, president of Kokes Family Home Builders, which creates residential communities for 55-and-over buyers in Ocean County, N.J., said that his staff had shrunk to 87 from a peak of 220 in 2007. With average home sales down to just 30 a year from 200, he said, he has no plans to hire. “There really aren’t any jobs in the construction industry right now,” he said.

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The typical precursors to increased hiring remained sluggish. Average weekly hours worked, which tend to rise as a sign that employers are maximizing their current staff, were flat in the latest month, and average weekly earnings nudged up only slightly.

In temporary help, which often ticks up as employers prepare to expand, there were no net new jobs in July.

Tig Gilliam, chief executive of the Adecco Group North America, said that while information technology, engineering and some other industry sectors were seeking more temporary workers, some others, like government and the mortgage industry, were not. “It’s the story of growers and shrinkers,” Mr. Gilliam said.

Austan Goolsbee, departing chairman of the President’s Council of Economic Advisers, said there was no question that rising oil prices and the shocks rippling out of the disaster in Japan had hindered United States growth and hiring. But he said government’s role was now to give the private sector incentives to hire, calling for Congress to pass trade measures, set up an infrastructure bank and pass patent reform.

With extended unemployment benefits scheduled to expire at the end of this year, 13.9 million people remain out of work, 6.2 million of whom have been searching for jobs for six months or longer.

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An additional 8.4 million are working part time because they cannot find a full-time job, and 1.1 million have become so discouraged that they have stopped looking for work altogether. Including such people, the broader measure of unemployment was 16.1 percent in July.

Mabel, a 54-year-old unemployed clerical worker in Pinetop, Ariz., who did not want her last name published for fear of putting off prospective employers, said she had been looking for work since being laid off in 2009. She is more frantic now as her unemployment benefits ran out in June.

“It’s like when you go and talk to people and ask, ‘Oh, do you have a job?,’ they say, ‘Oh no, my dear, we don’t have anything,’ ” she said. “ ‘Everything is so hard, it’s just the economy.’ I don’t know if anything is ever going to change.”

Since the recovery officially began two years ago, economists have been cautioning that it would take years to get back to full employment, given the depth of the financial crisis. With options for government aid now severely restricted by the political environment, said Steven Ricchiuto, chief economist at Mizuho Securities USA, “once you’ve frittered away all your opportunities, all that’s left is time.”

A version of this article appears in print on August 6, 2011, on page A1 of the New York edition with the headline: U.S. Reports Solid Job Growth, A Bit of Relief Amid Grim Data. Order Reprints|Today's Paper|Subscribe